South Koreans back at reopened inter-Korea factory

SEOUL, South Korea — South Korean businessman Sung Hyun-sang’s relief at the resumption of operations at a jointly run factory park in North Korea is tempered by big worries: Can he make up for the millions of dollars he’s lost since Pyongyang shut down the Kaesong complex in April?

About 800 South Koreans began returning Monday to their factories at the Kaesong park located just north of the Demilitarized Zone to team up with North Korean employees and test-run idle assembly lines. Some are also resuming production.

The reopening of the factories, after a spring that saw threats of nuclear war from Pyongyang, as well as a vow to restart atomic bomb fuel production, is the latest visible sign of easing tension between the rival Koreas.

But for the businessmen at Kaesong, many of whom, like Sung, operate small or mid-sized companies that need the cheap labor the North Korean factories provide, there’s a nagging worry about the future. The companies at Kaesong say they’ve lost a combined total of about 1 trillion won (about $920 million) over the past five months and will reportedly need up to a year to get their businesses back on track.

“I feel good about the park’s resumption, but I also have a heavy heart,” said Sung, president of apparel manufacturer Mansun Corporation, which has lost about 7 billion won ($6.4 million) because of the shutdown. “We’ve suffered too much damage.”

The park, established in 2004 during a period of warming ties between the Koreas, was considered a test case for reunification. It combined South Korean knowhow and technology with cheap North Korean labor. It was also the last major cross-border cooperation project before Pyongyang withdrew its 53,000 workers in early April to protest annual military drills between Seoul and Washington and alleged insults against the country’s leadership. The other reconciliation projects had already long been mired in deadlock amid worsening ties between the Koreas.

The complex survived previous lows in relations, including North Korea’s deadly artillery strike on a South Korean island in 2010. By the end of 2012, South Korean companies at Kaesong had produced a total of $2 billion worth of goods during the previous eight years.

So the park’s shutdown was more than a blow to ties between the Koreas. It also hurt the 123 South Korean companies operating there, mostly small- and medium-sized labor-intensive industries.

The South Korean government provided about 15 billion won in insurance payments to 46 of those companies, but they were required to return the money because the park has resumed operations, according to Seoul’s Unification Ministry.

“We felt disconsolate (about the North Koreans’ pullout) at first, but we didn’t know that it would last this long,” said Yeo Dongkoo, director at Sudo Corporation, which produces handkerchiefs and scarves at Kaesong.

Kaesong’s reopening comes as tensions on the peninsula gradually ease, with the North dialing down its war rhetoric and seeking to restart various cooperation projects with South Korea in recent weeks. The two Koreas plan to hold a reunion of families separated by the Korean War next week for the first time in three years and are pushing to hold talks on resuming lucrative tours to a scenic North Korean mountain.

After weeks of tough negotiations, including one meeting that ended with a scuffle, the two Koreas last week agreed to reopen the park after a trial run starting from Monday.

Garment factories like Sung’s don’t have overly complicated machines at Kaesong, so they don’t require a test-run and can resume production as early as Monday, officials said.

Sung said half of his 1,350 North Korean employees would return to work Monday to resume production.

“They are highly skilled laborers. They will produce masterpieces at Kaesong,” Sung said.

The two Koreas also plan to hold an international investors’ informational session at Kaesong next month to attract foreign companies. They’re also hoping to provide Internet and mobile phone connections to the park within this year. North Korea also agreed to exempt South Korean companies at Kaesong from taxation imposed for operations this year.

Some analysts say North Korea takes Kaesong’s resumption seriously because it believes it could help draw outside investment and revive its struggling economy, one of leader Kim Jong Un’s top stated goals, along with nuclear bomb production. The park was a rare, legitimate source of hard currency for North Korea.

But some wonder whether non-Korean investors will be willing to risk setting up shop at a park that could be closed again when tensions rise.

Some also remain skeptical because, despite North Korea’s recent conciliatory gestures, the country has vowed to continue its nuclear weapons program. A U.S. research institute said last week that a recent satellite image appears to show North Korea restarting a plutonium reactor at its main atomic facility.